Through the Looking Glass: Diane Henry

Diane is the founder of Rogue Capital Collective, a venture capital firm that invests in tech startups that focus on building solutions in the following categories: the future of money and real estate. Prior to Rogue, she dedicated 10 years to the successful operation and expansion of her Manhattan based commercial real estate company, landing her in Forbes Company to Watch. You can follow Diane on Twitter @InvestorDiane.

I'd love to kick off with a little bit about your background and how that led you to the world of early stage startups. 

I started out as a bootstrapped founder. To be totally clear, I was a founder first, and an investor second. My previous business made it possible to make angel Investments, which I started doing five years ago. One motive for me was the meaning and purpose I find in providing founders with resources, advisement and capital in a way that I did not have when I started out. I definitely cut my chops doing it the hard way, and though it toughens you up, the hard way can be overrated. Instead, you can get a lot done with the right counsel and resources at the right time. So part of my objective was to share some of the hard-earned knowledge I acquired launching and subsequently running my business for a number of years. 

The other thing that drew me to this work -- and I spoke about this a little in my TED talk -- was curiosity. Long before I was a tech seed investor, even before I could legally drink, I was making small investments. I worked through school, and whatever didn't go towards necessities went towards making very small investments, often in tech companies. This was back when companies would IPO a lot sooner, so I was able to buy a modest number of shares in public companies, many of which grew to become household names in tech. 

I was a thesis-driven investor before I had that language for it. I asked myself, ‘Where is the world going? What's happening in the Zeitgeist, and how is that influencing consumer decisions and how we live our lives?’. I think about products as an extension of how we live, how we view the world, what we want from life -- all of which drives consumer behavior. This thinking informed my early investment decisions and it played out well. 

Can you talk a little bit more about your own company and some of the key learnings there that are particularly relevant to your early stage investing now? 

One of the things I learned from my first company was how to hire well. Making an early investment in not altogether different from making a decision about whether I'd hire this person or team to be the founders of this company. Sure if the title of “founder” had a JD, it'd be broader, more cross-functional, and have higher risks and responsibilities than a regular job would, but it's still a question of fit -- is this person fit for this mission? 

My most significant business was in commercial real estate. As with any founder starting out, there was a lot of recruiting people into something that was just a vision at the time. Winning the best talent early often meant effectively competing with the perceived security of lucrative roles at established companies. To win the war for talent as a new company, you have to be beyond persuasive, you have to have an opportunity that's legitimately compelling, and be someone people can get behind. Winning candidate interest is the first hurdle, choosing the right hires is the next, since first hires are mission critical. Assuming a sound founding team, these all involve learnable skills and I emphasize them in my work with seed stage founders. 

Another thing I've developed a nose for is partner dynamics. This one makes me laugh because it often gets relegated into the world of soft skills, which is code for "optional things". But in fact, it's one of the leading causes of startup failure: founder disputes. 

So I think about the dynamics of founders and whether their strengths are complementary. None of these considerations are prescriptive but they are important factors that I take into account. 

What portion of the experience that you've accumulated, especially regarding hiring, is transferable or teachable to the founders? 

If a founder is of sound character and intrinsically motivated, a lot can be learned. If the raw material is there, a founder can be coached. With hiring, there's identifying the right person for the right role, and then there's getting a yes from your first choice recruits when you don't have as much to offer upfront. Beyond that,whether it’s recruiting, fundraising, or selling the product, someone on the founding team must be able to draw people into a vision before it exists and demonstrate that they are the leadership team to bring that vision to life. While I can't hand a founder these skills, I do choose founders who show potential in this area and then build on that, sharing my own tried and true strategies and perspectives. When it comes to hiring, it’s knowing how to see a person beyond their LinkedIn and their stats to determine if they're a cultural fit for the team and have the aptitude to deliver on what needs to be done. It's also important to suss out whether they can thrive in a start-up environment because of the vast difference between start-up and corporate. Before I was a founder, I worked briefly at a top global investment bank -- the level of resources and the number of tiers of support are worlds away from that of a startup. 

Lots of people are up for that adjustment to start-up life because they want the creativity and the opportunity to have their contributions directly affect outcomes. They want to feel vloser to that generative process of building a company.

Can we talk a little bit about what your focus is at Rogue Capital Collective? 

I tend to be a thesis-driven investor. Right now I'm focused on two areas. One is what I call the future of income, and the second is real estate software. 

For the first area, when I say the future of income, I'm not talking about the gig economy or even the future of work necessarily. I'm specifically talking about the future of income itself. I'm looking at the various ways that people pull in money that do not necessarily connect to any type of conventional employment. I like to look at recreational income -- whether it’s from managing a small stock portfolio on my own,  earning credits for creating game content on my favorite gaming platform, or selling my old clothes on consignment online. I'd include these or anything else I do online for fun that also contributes to my financial well being. 

Usually when we talk about fintech, we think about payment and savings, but I'm really more interested in the creation of alternate ways to make even small amounts of income. So, platforms like earn.com. I would even include Airbnb, where there's secondary income being generated and it's not being generated from what is traditionally considered work. You could call it the future of non-work. 

The second area I mentioned is real estate SaaS. Apart from having domain expertise here, real estate interests me as a sector whose time has finally come. It’s overcoming its historical reluctance to change. It has particular incentives as an asset class and nuanced stakeholder behavior patterns on the commercial side. The residential side changed first, and the commercial side is soon to follow. Commercial real estate also has its own set of problems to solve that haven't been touched by software. But software is a great decision making tool for the built environment. From repurposing existing real estate assets to discovery of real estate assets to construction management. For perhaps the first time, there's enough capital to support growth in that sector. 

Can you talk a little bit more about how you view your role as an investor with these companies and what your level of involvement and engagement tends to be? 

I often say I'm an investor and I'm invested -- meaning, I have a stake financially and otherwise in the outcome of this company and it's a bit personal in that regard. I'm invested in what happens. Seed stage companies' needs differ from companies that are further along. So to me, seed investors are loyal advisors at a time when founders are getting a lot of conflicting advice. They're a fresh pair of eyes on the situation and dispatcher of resources. Even if strategies and business models inevitably evolve, investors should be supporting founders and upholding their vision. 

That being said, I personally believe in founders running their own companies. I'm not a fan of internal power struggles.With the exception of cases of misconduct, I am unconvinced that it leads to better outcomes in the long run. To the degree possible, founders and their investors should be on the same side of the table. 

I think that aligned investors are going to keep founders true to their vision of the company. It’s what I would want. And that alignment comes from the founders and investors having the same goals for the company and understanding what venture capital is and isn't for. All of those things should be part of the picture. 

Do you run into a lot of situations where it seems like there is a mismatch between a given company's trajectory and expectations and venture capital as a whole?

 I think you sometimes see it from the outside, in hindsight, if founders publish post-mortems. Sometimes these things play out for further downstream, after the seed stage. My focus is in the very beginning, and I think that is a great place to determine alignment: who is on the cap table matters, what the configuration is matters, and how well they reflect the founders' outlook for their own startups matters. I actually think fundraising can become easier when that is part of your strategy at the start. 

What drove you to start your own fund rather than join an existing one? 

I was surprised by the degree to which people had been waiting for me to launch a fund. After I announced, that became clearer, but you know, I'd been working in the ecosystem, advising, and investing for five years at that point. A lot of people had sort of suggested that I start a fund here and there, but it wasn't until I sat down with a very prominent VC friend who really made the case in no uncertain terms that this was the direction that he strongly believed I should pursue. He was not the first person to suggest that I launch a fund, but he was the last. 

I think that for me -- and this is true when you start any business, a fund is no exception -- it came down to this: is there a gap in the market? is there somebody else who's doing this that can help as opposed to starting my own thing? When all of these answers pointed to a new fund, it became clear that this was something worth pursuing. Once it was clear that there was a market gap in terms of my thesis and who I am as an investor -- only when that was clear -- did I decide to explore doing a fund. 

I think a misconception about venture is that you want to break into something. People are always trying to get into the space and break into the VC game. Ok, you want to break into it, but why? Does that space need you, and if not, well, what can you bring that the space does need? I think that's a hard question but once enough of us have a strong answer, it elevates the game. 

What have been the biggest differences in the transition from angel to sole GP institutional VC? 

I am the founding member of the Rogue Capital Collective and at the moment, it's a solo GP fund. That may or may not change in the future, but I'm ready, willing, and able to do it solo. 

One of my favorite differences between being an angel and running a fund is having LPs. I've been an LP, and now Rogue has LPs, and any time you have other stakeholders, it changes the trajectory of what's possible. When I saw that the work I was doing had material benefits and favorable outcomes, it became clear that expanding upon it was important not only to me, but also to the ecosystem. 

Being part of a fund, which I called Rogue Capital Collective for a reason, changes what's possible. It changes how much you can offer founders and how many founders you can support and at what level. It's also drawing together of a set of people who have an outlook in common that is a little different from what already exists. 

That word, "Collective", is an expression of how fundamentally collaborative this investment work is. Every group movement or every set of cultural factors of this industry is driven by a collection of people who agree about something. And there are collectives of people who agree about things that are not yet industry standard, but when we find each other, it completely changes what's possible. I would include you in that collective for sure. There are a lot of new voices coming into this business, and I think that's what's going to create the new opportunities. That's what's going to create the next fresh crop of ideas because in the end, this industry is about discovering what's new, not replicating the past. I think that when the industry gets too stuck on replicating the past, it stagnates. And for venture capital as an as set class, stagnation is death. I actually think that it becomes a risk factor. The difference between being an individual investor and being part of the fund is that more is possible within an institutional structure rather than without it. 

Absolutely -- having LPs adds a different level of rigor and accountability that I think changes the dynamic in the working relationship in a positive way. 

A thousand percent. I believe that having external stakeholders and having accountability are incredibly useful for many reasons, not the least of which is having a sanity check. Primary control rests with whoever is in charge, but external accountability will help people see blind spots and possibilities they weren't seeing, and I'm no exception. If you're a founder of a fund, you're subject to the same status of being human, which means that there are things you can't see, and there are only 24 hours in a day. So that leverage is incredible. 

I also really liked your point about stagnation in the venture industry and how that is, as you said, death. I'd be curious to hear a little bit more about your thoughts on what you feel has changed over the last couple of years as you've been increasingly involved in early stage funding. 

A few things. There's more money in venture than when I started five years ago. And that money is also pooled more and more towards the later stage. I think that the need for seed stage capital is increasing in a way. Yes, there are a lot of microfunds, which are counted as anything under $100 million. But there's a lot of daylight between, say, $1 million and $100 million, yet they're all considered micro. 

The increased size of rounds and the pooling of capital later, even later in terms of what we'd formerly refer to as "seed", has really created white space in what I'd call "true seed", by which I mean a team with a defensible market position, a working prototype, and maybe some early users. People conflate the overall increase in capital in venture with everything getting funded and that's not actually true. The distribution of those dollars matters. These dynamics create opportunity for me as a seed investor. So I'd say that's a big change - the amount of money and how that money is being distributed. 

I will mention this briefly -- the conversation about diversity did not exist five years ago. When I started, it was not a thing. One of the byproducts of that, interestingly, is that a lot more has been said about it than has actually happened in terms of increasing the numbers. The numbers don't bear out the degree of attention that the topic has gotten. I think that could be a little dangerous because people think it must be a solved problem because of how much has been said, but when you look at the data, it doesn't bear that out. Yet, I am what I call a battle-tested optimist. I believe that those dynamics can and hopefully will evolve, but at the moment, the conversation is ahead of the progress. 

What do you think is causing that lag? 

That’s a good question, and it has a multi-faceted answer, but I'll just say that there's got to be people who deploy capital with the willingness and the authority to depart from business as usual. And I'll leave it at that. It really comes down to the replication of the past versus building towards the future that we want. 

What do you see being the main drivers of that shift, if you were to map out what it looks like on a structural level? Because it's one thing to have a one-off success story and it's another to really re-evaluate the incentive structures and the alignment issues that we were talking about earlier.

I think that it's important when we have this conversation to think about how the incentives work in this industry. As individual investors, we are driven by returns. So I really need to see where are the opportunities to realize financial returns, and do so in a way that creates real value. To me, those two things are tied together. There are ways to make money without generating value, but those aren't what I'm focused on as an investor. I'm focused on what's actually going to generate value creation for people, and the financial returns are a proxy for that value creation. 

Not everyone who's managing capital is looking at it that way. Sometimes, the incentives are to not lose money. Then you're not looking for opportunity, you're looking to avoid risk. I think that any conversation that doesn't speak to the actual incentives of the people at the table is going to be a conversation that goes in circles. 

As far as what it will take to move the needle, I think a lot of people are genuinely ready to see things done differently for a number reasons -- not the least of which being the fact that everyone's looking for alpha -- where we can get more returns? So we have to be in places that haven't been tried before.

I'm a big believer in directing resources towards people who have a credible track record of supporting places and people that aren't overrepresented already. For LPs backing funds, it's important to back fund managers who have already actively gone to bat for diverse entrepreneurs in some way, ideally over a meaningful time period. Let me be completely clear about this: | think anyone and everyone can back founders who don't look like them. I certainly did. It's not to say that the only people who can do it are the people who represent the group in question. 

There are many, many groups that are underrepresented in terms of access to capital. But when it comes to the redistribution of resources in a way that will allow these emerging opportunities to reach their full potential and to realize the return that they're waiting to deliver from the market, I think that it's a good idea to give the reins to people who know how to ride the horse. Channel the resources to people who have the credibility to deliver and to properly evaluate founders who are matching new patterns, because every investor is pattern-matching in some way or another. The problem with pattern-matching is when you have hidden heuristics - like when people are not counting that all the founders have something in common that's not being named. 

If you want to see different outcomes, then you want to back people who know how to properly evaluate a candidate who doesn't match the existing pattern, but matches a new pattern -- one that positions them for success -- and is not based upon dubious factors that have nothing to do with success such as gender. 

Can you share some thoughts on your outlook for the industry? 

I think we are in an incredible time in the industry and in the world right now. In my time in the ecosystem, one thing that I've seen is that when new VCs step up to the front, new founders surface. That's an incredible thing -- who's at the front of the room influences who raises their hand. As venture investors, it's our job to find opportunity where others are not looking. It's our job to stay ahead of the curve and to open pathways for founders who are ready to deliver tremendous value and will take off once they have a way in. And that's the role of the seed stage as I see it. 

Right now I'm laser focused on the two areas I mentioned, and as a founder, if you even think you might be in one of those areas, contact me. I read every deck that crosses my desk, even if I can't respond personally, and there's a reason for that. I think the closed network aspect of the industry can make it harder than necessary, especially for first-time founders. 

I also think there's enough information out there that first-time founders can assess for themselves if they're even ready to pitch. It's a two-way street: we have to make a pathway for founders to get in, and founders have to be able to accurately self assess if they're ready for prime time, if they have something to pitch that's actually investable. 

But if we all do our part to widen our lens -- and that includes GPs and LPs -- we can all play a role in the industry leveling up. 

Through the Looking Glass: Carlos Miguel Gutierrez

Carlos Miguel Gutierrez is the Founder and CEO of Highline Point Group, LLC, a strategic advisory firm based in New York City. An investor and advocate for entrepreneurship, he is also a Managing Director of Golden Seeds, one of the nation’s most active early stage investment firms. Carlos also serves as the Executive Director of the Ignite Institute at Saint Peter’s University, which focuses on fostering entrepreneurship. He is a contributor to The Huffington Post, The Times of Israel, Asia Times, and The Jerusalem Post. His writing has also been featured by CNBC, Univision, and El Pais. You can follow Carlos on Twitter @cmgutierrezjr.

I'd love to start with a little bit of your background and how that led you to the world of early-stage startups.

I've had experience in various Industries: politics, government, international development, government affairs. I'm a lawyer by training and I also went to grad school for business leadership. All of these things helped me when I decided to really get into investing. 

I was always interested in public companies. But as you know, investing in public companies is very passive.

I had the opportunity to make my first angel investment a few years back, and I realized I could really be more hands-on, almost like a part of the extended team of the company. I could use my background and network to help the company and really see myself adding value -- so I was hooked. It’s very interesting to work with people who are passionate and who have identified a solution to a big problem. I think just by osmosis, it makes you passionate. 

Can you talk a little bit about some of the roles you had within the venture ecosystem? 

I've been an advisor, a mentor, and an investor. I have gotten involved with various groups and organizations, not only to invest in Innovative companies and entrepreneurs, but also with a mission-driven approach that has a social impact. 

I was introduced to Golden Seeds a couple of years ago and was very impressed. Golden Seeds is the most active angel group investing in women-led companies in the United States, having invested over $110 million in women-led companies over the last 10 years. We all know about the funding gap that exists for women and minorities -- even geographically. So naturally there is a great opportunity there. I always tell people that yes, there's a social component to it, which is helping women who are not receiving funding anywhere near the levels of men. But the second part is that if you look at the data, women-led companies tend to perform better than those led by men, and diverse teams perform better than homogeneous ones. You can create a pretty strong investment thesis behind that. 

Through my work with Golden Seeds, I was introduced to Chloe Capital, an early stage VC firm that invests in women-led founders and diverse teams by ethnicity, gender, and geography. They’re an extremely passionate team, so I’m very glad to be able to lend my insight to that mission as an advisor.

I’ve also invested as an angel across various verticals, including cybersecurity, ed-tech, financial services, entertainment, and retail-technology among others. Additionally, I’m a mentor with the Stanford Latino Entrepreneurship Initiative, a program that helps Hispanic & Latino entrepreneurs learn about scaling their businesses.

I really enjoy being around entrepreneurs. 

When making investments, are you mission-oriented or financially driven? 

A little bit of both. I'm industry agnostic, and like any investor, I’m looking for businesses that have the potential to grow to be very big. I’m not focused on any particular market. 

Yet, within that basic thesis, I am also looking for underrepresented founders, who by the way are just as good as everyone else; but who are not receiving the attention that they should be, or they don’t have access to networks or mechanisms that will allow them to go out and raise funds. 

With that said, there are many opportunities within specific segments. For example, there are businesses targeting certain demographics that may perhaps only come from a demographic that understands that need. That’s where, as an investor, you have to keep an open mind, because there have been many great opportunities that have been passed on by investors because they lacked that open mind. If you look at Spanx, the founder had a tough time convincing male VCs about the product, and those who didn’t invest missed out on an amazing story. 

One thing that you mentioned that keeps me up at night is access. So much of the traditional venture landscape is premised on raising friends, family, and angel money in order to build traction, reputation, and network to then raise venture capital. Especially with underrepresented demographics, this track becomes increasingly challenging, especially on a socio-economic basis. Do you think there has been any sort of structural solution to this challenge of getting ‘inception’ capital, and has it changed over time? 

I do think that never before has there been so much attention placed on the problem. Everyone is talking about it. From a structural perspective, I think that there are more VC funds and angel investors who are specifically looking to be the very early stage investors in companies that are founded by entrepreneurs of backgrounds that are typically underrepresented. So there is a lot of activity.

Yet, at the same time, it is a little bit disappointing when you see how much activity there is, and then you see the data, and you’re like, ‘Wow, we barely made a dent’. So, there's definitely a disconnect there. Going back to your question, often times, you might hear investors ask an entrepreneur, “Who’s invested in your company? Have your friends and family invested?” Some investors consider that your friends and family know you best, and if you can’t convince them to give you money, then, something’s not right there and they might move on.

The problem with looking at it that way is that, as you mentioned, not only are you missing out on a potential opportunity, but you're also ignoring socio-economic realities. Not every entrepreneur has access to friends and family that can fund their company. 

So, I think that requires a shift in thinking. I think there are people --  both angel investors and firms -- that understand the reality of the underfunding gap, and they’re looking at it differently. One change that’s taking place -- and will take a few more years to reach a critical mass -- is increased diversity in investors -- not only in angel investors and LPs, but also in venture capital fund investors who bring a different perspective and mindset. But as I mentioned, it does still appear from the data that there's a lot of work that needs to be done.

Also, founders to a certain extent are very important in this discussion. For example, I've spoken to founders who say that they wanted to talk to Golden Seeds because they want women investors because they don't want all their investors to all fit one certain profile. 

And, then there's also pressure even just from society. You see that across all Industries, whether it’s changes to representation or to pay. A societal shift is going on, and we're all putting pressure to create positive change. 

I’m really interested to see how the dynamic will change from the LP level and whether there will be pressure from institutional investors, fund-of-funds managers, even high net worth individuals who are making investments into funds, and whether this topic is going to become a priority for them. What's your experience been with that from an LP perspective? Is this something that's picking up momentum?

I think the rise and success of funds investing in underrepresented entrepreneurs is indicative of the desire of LPs to invest in those companies. The conversation does come up more, and I think it goes back to what I mentioned earlier -- not just from a societal perspective, but also in terms of the recognition that there is a thesis behind investing in underrepresented founders. 

I think the signs are positive from all angles, moving in the right direction. It’s incremental and it's going to take time, but I think the industry is moving in the direction of better representation. 

How do you think about your different investor roles, as an LP, a fund manager, and an angel investor? What are the benefits of the different structures/vehicles for you personally?  

One very basic answer is just for the sake of diversifying. As you know, it’s very risky to invest in early stage companies. The risk of failure is very high. In terms of diversification, I think it makes a lot of sense to invest as an LP in funds that have greater resources than you do as an individual, not only to conduct due diligence but to be able to source deals and cast a wider net in building a portfolio. 

In terms of being an angel, it's very rewarding. To do your due diligence, go through the process, meet an entrepreneur, learn about what they're passionate about, and be able to say ‘I can be helpful’. So if I meet companies where I don't understand the industry or have a background/network that can be helpful, then it's not as exciting or interesting for me because I can't really add a lot of value. I like to be able to help when/where I can, which is what entrepreneurs are looking for as well -- they want strategic value beyond just writing a check. 

Both methods are great ways to get exposure into a very exciting asset class. 

What advice do you have for people who do not typically have experience with a start-up or even with technology necessarily, but are looking to gain exposure to the VC industry, which can be very daunting and insular from the outside looking in?

If you’re interested in learning about venture, start going to events. Start going to pitch events, demo days, panels -- there are so many activities where you can just go and learn not only about the industry, but also the language and terms used in the industry. Over time, when you're involved in venture capital or angel investing, there are things that you learn from being involved and gaining experience. You can read a book, but it's not the same. So I would say number one is to just get involved and seek out opportunities where you can be around people who know the industry, gain that entry level knowledge, and start networking. 

Beyond that, I think joining an angel group is a great way to learn about investing. In my case, I had my own due diligence process that I had learned on my own. Golden Seeds has a very institutionalized due diligence process and I learned a framework that I could place on top of my own framework when I invest. Also, in an angel group, you're surrounded by other individuals who have broad experience across various Industries and verticals, and it's helpful to hear how other people are thinking about companies and what questions they’re asking. This expands how you would assess a potential opportunity.

It’s also a little bit tough if you're just entering the investing world, looking for deals and sourcing deals by yourself. It helps to have an angel group that not only sources but also screens deals, so you look at companies that are at a certain stage, have been derisked a little bit, and have been evaluated by people who  know what they’re doing. That way, you don’t have to go out there and invest blindly.

Portfolio Spotlight

Emerging Venture: Beyond The Headlines

To many, venture capital is what is seen in the headlines - unicorns, mega-funds, runaway valuations, and hoodie-clad tech-titans cruising the Valley on scooters. But at its very core, venture capital could not be further from this image. Venture is where capital meets innovation, primarily outside of the headlines, touching every corner of our personal and professional lives: how we eat, communicate, exercise, commute, work, and travel. This makes it a critical asset class for investors with long-term investment horizons, but it also demands deliberate strategy, structure, and process to properly allocate capital and manage risk.  

Not every venture deal, however, results in a blockbuster $1B+ IPO. The reality is actually quite to the contrary. Over 90% of 2018 exits came via M&A transactions, of which 83% were sub-$500M [1]. This suggests a deep opportunity set of “sub-unicorns”, putting smaller funds and often, emerging venture managers, at the forefront of the innovation curve and enabling them to stealthily deliver outsized alpha to those who wish to look for opportunities between the cracks in this vital but often fragmented and opaque asset class.   

Emerging venture firms, though perhaps not yet household names, are doing the digging and nimbly deploying smaller pools of capital while leveraging strategy, structure, and process to create value through hands-on engagement with entrepreneurs. Data shows this grassroots approach is generating attractive returns relative to larger funds and more established brands. In a recent study completed by Canadian Technology Accelerator, top-quartile venture funds <$249M generated IRR of 39% versus IRR of 33.6% ($250M-$999M funds) and 9.9% ($1B+ funds) [2]. This engaged approach is fully aligned, free enterprise innovation in its purest form. It is also miles away from spray and pray methodology and underscores the criticality of manager selection in the venture asset class.  

At Laconia, we live on the outskirts of the land of unicorns (though we are certainly happy to identify one!) where there may not be headlines, but there is exciting opportunity for those willing and able to do the hard work. The moral of the story is there is a land not terribly far away, just on the other side of the forest, inhabited by innovative sub-unicorns that are generating venture returns beyond the headlines. Choose an able guide to help you find the way – you will be glad to have taken the road less traveled.  

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[1] Data provided by Pitchbook and the National Venture Capital Associations’ “Venture Monitor”. Data as of 12/31/2018.

[2] Data parameters: 951 venture capital funds, Based in the US and Canada, FY2002 – 2014. Study conducted by the Canadian Trade Accelerator (2019) ctaconnects.com/emerging.

Portfolio Spotlight: Wethos

We are thrilled to announce that we’ve led a $3 million seed round in Wethos!

Wethos curates innovative teams of marketing specialists to work with meaningful brands. Wethos doesn’t neatly fit into any single investment category - Instead, it’s what you’d get if a network, managed marketplace, and future of work platform had a futuristic baby. This atypical model is one of the keys to Wethos’ momentum and traction in the market. 

By delivering on the promise of curating the right people for every project in a compelling time frame and price bracket, Wethos’ offering exceeds that of traditional solutions by an order of magnitude. At the same time, Wethos provides freelancers with an alternative to the lonely, uncertain, and “race to the bottom” reality of most independent work. By enabling users to find work they actually care about, removing the burden of administrative work management, and always putting freelancers’ rights at the forefront, Wethos repairs the broken trust of the gig economy and, as one of their specialists aptly said, creates “what freelance work was actually meant to be”.

No one is better equipped to tackle this opportunity than the Wethos team. They have remained uncompromising on both building a better world for freelancers while simultaneously tackling the highest pain points in the market, and we can’t wait to see them embark on this next stage.

We were initially introduced to Rachel by Mike MacCombie two years ago (thanks again, Mike!). At the time, Wethos was still in the earlier stages of building its bench of freelance specialists, with a focus on matching individuals to projects. Because of the b2c-esque nature of freelance community-building, the company was not a fit for Laconia’s b2b SaaS-focused investment strategy at the time. Still, we had no doubts about Rachel’s focus, passion, and inevitable success. Over the next two years, we stayed in touch, regularly meeting for working sessions, catching up more casually, and collaborating on tech/VC community events. 

Fast forward to our latest catch-up this past February. Wethos had built a community of 4,000+ freelance specialists, in large part cracking the chicken-or-egg problem that b2b/b2c companies often have. They had launched dozens of teams for leading organizations after having successfully navigated a major business model pivot, all while building out a formidable distributed team and figuring out how to scalably create, launch, and manage curated teams in a new and unique way. As we dove into the mechanics of the business, I was blown away by the level of detailed thought in every component. So it was no surprise that when Rachel asked, “Which funds do you recommend we talk to about this round?”, my answer was 🙋‍.

After Rachel got the rest of our team up to speed (they were stoked as well!), we dove right into our due diligence process, which got us even more excited about the company for multiple reasons. One of the core components of our due diligence process is introducing companies to 6-12 prospective customers in order to gauge market demand, value proposition strength, differentiation, and our ability to add value by opening doors, all while simultaneously generating sales leads for the company. With Wethos, we received resoundingly positive feedback, with about half of the organizations immediately moving forward with the process to hire Wethos teams. This conviction was echoed by Wethos’ existing customers and freelancers, who highlighted the exceptional quality of the specialists and Wethos’ seamless workflows as the main selling points.

We’ve found that how companies handle due diligence is often strongly correlated with how they run their business. We often see CEOs paralyzed during fundraising due to the bandwidth drain, but Rachel had everything ready to go and seamlessly collaborated with her team throughout the whole process. This delegation, responsiveness, and thoroughness were strong signals of the Wethos team’s high level of trust and efficiency. Our impression of this team dynamic was cemented by the group meeting we had with co-founders Rachel, Kristen, and Claire. The three of them demonstrated a deep mutual respect, complementary skills, individual adaptability within their evolving roles, and an unwavering shared vision for the company.

As with all of our investments, we worked in partnership with the founders to identify a strong co-investor group for this round. We couldn’t be more excited to be working with ValueStream Ventures, Loup Ventures, and Overton, among others, as well as existing investors including Flybridge and BBV.

We could go on for days about the massive market opportunity, innovative structure, and many other things that excite us about this company -- but instead we’ll leave you to check out some of their incredible work, follow them to stay posted in real time, and explore opportunities to join them as a specialist, customer, or teammate. 

For more on their latest fundraise, visit their blog.